Municipality Finance Plc
Half Year Report
14 August 2020 at 10.30 am (EET)
Municipality Finance Plc Half Year Report January–June 2020: The COVID-19 pandemic increased the demand for financing in municipalities
This release is a summary of Municipality Finance’s Half Year Report published on 14 August 2020. The complete Half Year Report with tables is attached to this release and available at www.munifin.fi.
In brief: MuniFin Group in the first half of 2020
- The Group’s net operating profit excluding unrealised fair value changes increased by 3.6% and amounted to EUR 93 million in the reporting period (EUR 90 million). The net interest income grew by 5.3%, totalling EUR 123 million (EUR 117 million). Costs in the reporting period amounted to EUR 32 million (EUR 31 million), making it 3.2% greater than in the first half of 2019. The COVID-19 pandemic had only a minor effect on the Group’s net operating profit.
- The net operating profit including unrealised fair value changes amounted to EUR 62 million (EUR 34 million). In this reporting period, the unrealised fair value changes were EUR -31 million (EUR -56 million).
- At 87.8% (83.1%), the Group’s CET1 capital ratio was very strong.
- The Group’s leverage ratio was 3.8% (4.0%) at the end of June.
- The Group’s long-term customer financing grew by 7.8% (3.3%) in the reporting period. The long-term customer financing portfolio stood at EUR 26,743 million at the end of the reporting period (EUR 24,798 million). This figure includes both long-term loans and leased assets. The total of new lending in January–June amounted to EUR 2,543 million (EUR 1,386 million). The growth was spurred by the increase in the demand of loans and a drop in the availability of financing from other credit institutions, both due to the COVID-19 pandemic.
- In the entire customer finance portfolio, the amount of green financing targeted at environmentally friendly investments totalled EUR 1,436 million (EUR 1,263 million).
- In January–June, new long-term funding reached EUR 5,504 million (EUR 3,432 million). At the end of June, the long-term funding totalled EUR 35,805 million (EUR 33,929 million).
- The Group’s liquidity has remained excellent. At the end of June 2020, total liquidity amounted to EUR 8,311 million (EUR 9,882 million). The Liquidity Coverage Ratio was 353.9% (430.2%) at the end of the reporting period.
- Return on equity (ROE) was 6.2% (6.8%) at the end of June.
- Outlook for the second half of 2020: the Group expects its net operating profit excluding unrealised fair value changes to remain at the same level as in 2019.
Comparison figures deriving from the income statement and figures describing the change during the reporting period are based on figures reported for the corresponding period in 2019. Comparison figures deriving from the balance sheet and other cross-sectional items are based on the figures of 31 December 2019 unless otherwise stated.
President and CEO of MuniFin, Esa Kallio:
“For the MuniFin Group’s customers, the economic crisis triggered by the COVID-19 pandemic has been very different than previous downturns. In municipalities, the pandemic increased expenditure and reduced income base. It first hit the large cities whose economic structure is particularly service-heavy and whose finances rely greatly on their own tax revenue.
In housing construction, the effects of the COVID-19 pandemic have been more moderate than in municipal finances. Private construction is expected to slow down at least temporarily due to the pandemic, but the crisis may give further boost to state-subsidised housing production.
The pandemic has significantly increased the demand for MuniFin’s financing. The lending portfolio grew strongly – by almost 8 per cent – which was partly due to other credit institutions’ partial withdrawal from financing municipalities. MuniFin’s new lending increased by almost EUR 1.2 billion in January–June compared to the previous year’s figure. Our customers’ financing has been secured throughout the crisis.
Our funding has continued effectively and without interruptions throughout the pandemic. We issued three successful benchmark bonds during the reporting period. These issues were several times oversubscribed despite exceptionally challenging market conditions. Successful issues are a strong testimonial of our ability to ensure our customers’ access to funding also in difficult market conditions. The pandemic had only a minor effect on the Group’s profit. The net operating profit excluding unrealised fair value changes increased by 3.6% in the reporting period, and the capital position remained strong in relation to business operations.”
| Key figures (Group) | |||
| 30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 | |
| Net operating profit excluding unrealised fair value changes (EUR million) | 93 | 90 | 186 |
| Net operating profit (EUR million) | 62 | 34 | 131 |
| Net interest income (EUR million) | 123 | 117 | 240 |
| New lending (EUR million) | 2,543 | 1,386 | 3,175 |
| Long-term customer finance (EUR million) | 26,743 | 23,719 | 24,798 |
| New funding acquisition (EUR million) | 5,504 | 3,432 | 7,385 |
| Balance sheet total (EUR million) | 41,288 | 36,956 | 38,934 |
| CET1 capital (EUR million) | 1,172 | 1,076 | 1,162 |
| Tier 1 capital (EUR million) | 1,519 | 1,423 | 1,510 |
| Total own funds (EUR million) | 1,519 | 1,423 | 1,510 |
| CET1 capital ratio, % | 87.8 | 69.1 | 83.1 |
| Tier 1 capital ratio, % | 113.8 | 91.4 | 107.9 |
| Total capital ratio, % | 113.8 | 91.4 | 107.9 |
| Leverage ratio, % | 3.8 | 4.0 | 4.0 |
| Return on equity (ROE), % | 6.2 | 3.6 | 6.8 |
| Cost-to-income ratio | 0.3 | 0.5 | 0.3 |
| Personnel | 167 | 163 | 167 |
Webcast for investors and other stakeholders
MuniFin’s results in January–June 2020 will be presented to investors and other stakeholders on a webcast held on 14 August 2020 at 2 pm EET. The webcast can be accessed at munifin.videosync.fi/half-year-report-2020. A recording of the event will be available on MuniFin’s website after the webcast.
MuniFin (Municipality Finance Plc) is one of Finland's largest credit institutions: the company's balance sheet totals approximately EUR 41 billion. The company is owned by Finnish municipalities, the public sector pension fund Keva and the Republic of Finland.
MuniFin's mission is to build a better future in line with the principles of responsibility and in cooperation with its customers. MuniFin's customers are Finnish municipalities, municipal federations, municipally controlled entities and non-profit housing organisations. Lending is used for environmentally and socially responsible investment targets such as public transportation, sustainable buildings, hospitals and healthcare centres, schools and day care centres, and homes for people with special needs.
MuniFin's customers are domestic but the company operates in a completely global business environment. It is the most active Finnish bond issuer in international capital markets and the first Finnish green bond issuer. The funding is exclusively guaranteed by the Municipal Guarantee Board.
The Municipality Finance Group also includes the subsidiary company, Financial Advisory Services Inspira Ltd.
Read more: www.munifin.fi
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